Rentals easing in IT hubs on subdued sentiment: Study

With the IT sector witnessing subdued sentiment amidst pressure on hiring and annual pay rise for employees, the country's software and services hubs are expected to see a 10-20 per cent reduction in the housing rents over the next three quarters.

Gurgaon and Noida are also witnessing a correction in rentals up to 10-15 per cent.

Noida: With the IT sector witnessing subdued sentiment amidst pressure on hiring and annual pay rise for employees, the country’s software and services hubs such as Bengaluru, Hyderabad, Chennai, Pune and Noida-Gurgaon in NCR are expected to see a 10-20 per cent reduction in the housing rents over the next three quarters, said an ASSOCHAM paper released today.

Unlike in the past when the fresh inflows of young professionals were pushing the demand for rentals in Bengaluru, the house owners in India’s ‘Silicon Valley’ seem to have done a reality check and are accordingly slashing the rentals, while offering better amenities.

“Even in the existing rental deeds, the tenants are seeking better options and no hike in the monthly outgo, quoting the adverse industry outlook. With better options, the market is tilting in favour of the tenants, especially those paying above Rs 50,000 per month,” the paper stated.

Going forward, the rentals may ease at least by 10-15 per cent in Bengaluru, Chennai and Hyderabad, while the decline may be steeper, up to 20 per cent in Pune, in the next three quarters. Gurgaon and Noida are also witnessing a correction in rentals up to 10-15 per cent. Gurgaon is holding up because of the demand push from the National Capital Rregion (NCR).

ASSOCHAM’s latest estimates reveal that while the IT sector continues to employ over four million people, mostly in the four to five big cities, the hiring growth has subdued. Earlier the biggest of the IT firms would add tens of thousands of new employees every year along with liberal sops for the existing staff. That scenario has totally changed. Even if these companies may be adding on net basis, the new jobs are not being added in an enthusiastic way, adds the paper.

“The IT and other services like financials are among the sectors which pay well. Besides, the age profile of these employees is quite tempting for the marketers. They are good spenders and want good life. These factors kept the markets for rentals pushing up, especially in gated and well-equipped housing complexes and societies in Bengaluru, Gurgaon, and Hyderabad. There is certainly a pause visible,” ASSOCHAM Secretary General D S Rawat said while releasing its paper.

IT and ITeS professionals aged 30 to 45 years and above earn between Rs 20 and Rs 50 lakh per annum on an average and typically pay even up to Rs 50,000- Rs 1.50 lakh per month as rent, in case they do not own their flats for self use. There is another a range paying between Rs 15,000 and Rs 35,000 and upward. All these segments are witnessing easing of the rentals.

In any case, the markets for real estate has gone down in major micro markets owing to a combination of factors. With a large inventory of even ready flats which would be available for use in the next few months, the supply for the rental markets would further improve.